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Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt relief

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Anonymous
Not applicable

Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt relief

Hello Everyone -

 

I'm going through a separation with my spouse.

 

We are high income earners (almost $350k gross annual combined, I account for 67%).  However, also in a significant amount of installment debt due to both a medical issue and some other serious non-disclosed issues in the relationship.

 

Mortgage and car loans are all reasonable payments.  I can afford these on my own.  Including my home utilities & upkeep.  There are two mortgages on the home.  The second is a home equity loan which was used to consolidate even more installment debt.  While my credit soared for some time after this loan (2021), it's now going into the low 600s.

 

The plan has been to refinance the primary mortgage and take out yet additional equity in order to repay installment loans equating to approximately $95k.

 

More urgently, however, is what I would call loan shark "loans" from various online lenders that equate to just over $30k.  The interest rates vary from 35% - 300% from what I can see.  Some are in my name and some are not.

 

We have both recently receiving an influx of cash.  I am attempting to formulate a plan that uses the money wisely.

 

  1. Am I best to contact a credit consolidation company?   It's highly unlikely that I would quality for a consolidation loan but rather a negotiated settlement under one single payment that I can split with my spouse.
  2. The most urgent issue to address are the short-term "sharks" whose payments draw more than our net-monthly income.  Am I able to settle these and stop paying them, staying employed and working through a credit consolidation company?

Any other helpful advice would be greatly appreciated.  Thank you!

Message 1 of 11
10 REPLIES 10
dragontears
Senior Contributor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re


@Anonymous wrote:

Hello Everyone -

 

I'm going through a separation with my spouse.

 

We are high income earners (almost $350k gross annual combined, I account for 67%).  However, also in a significant amount of installment debt due to both a medical issue and some other serious non-disclosed issues in the relationship.

 

Mortgage and car loans are all reasonable payments.  I can afford these on my own.  Including my home utilities & upkeep.  There are two mortgages on the home.  The second is a home equity loan which was used to consolidate even more installment debt.  While my credit soared for some time after this loan (2021), it's now going into the low 600s.

 

The plan has been to refinance the primary mortgage and take out yet additional equity in order to repay installment loans equating to approximately $95k.

 

More urgently, however, is what I would call loan shark "loans" from various online lenders that equate to just over $30k.  The interest rates vary from 35% - 300% from what I can see.  Some are in my name and some are not.

 

We have both recently receiving an influx of cash.  I am attempting to formulate a plan that uses the money wisely.

 

  1. Am I best to contact a credit consolidation company?   It's highly unlikely that I would quality for a consolidation loan but rather a negotiated settlement under one single payment that I can split with my spouse.
  2. The most urgent issue to address are the short-term "sharks" whose payments draw more than our net-monthly income.  Am I able to settle these and stop paying them, staying employed and working through a credit consolidation company?

Any other helpful advice would be greatly appreciated.  Thank you!


So the bad news. 

You can't settle any account for less and not have it negatively affect your credit. Most lenders won't even consider it unless you are already in default. 

Be very, very careful if you decide to go a "credit consolidation company", most are scams or charge you monthly until all of your accounts are defaulted then try to negotiate settlements.

There may be an underlying issue here. You took out a home equity loan last year but are once again have high interest debt. I mean this in the nicest way but you really need to look at your budget, cut everything possible and pay things off instead of trying to keep taking on more debt. 

Message 2 of 11
Anonymous
Not applicable

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

Thanks.  You're exactly right, though there are some extenuating circumstances that led to this in the past few months that I have little control over.

 

I want to get to a place of stability where I have a mortgage and a small car payment.  Re-accumulate cash (non-investment) savings.  Build a budget from there.

 

With all of this immediate debt, it's difficult to see any way out without a major negative financial move (debt consolidation or CH7).

Message 3 of 11
dragontears
Senior Contributor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re


@Anonymous wrote:

Thanks.  You're exactly right, though there are some extenuating circumstances that led to this in the past few months that I have little control over.

 

I want to get to a place of stability where I have a mortgage and a small car payment.  Re-accumulate cash (non-investment) savings.  Build a budget from there.

 

With all of this immediate debt, it's difficult to see any way out without a major negative financial move (debt consolidation or CH7).


Unless you live in a crazy high cost of living or have a huge family you will not qualify for a CH7 as your income is >200k, you would have to do a CH13. 

Message 4 of 11
Anonymous
Not applicable

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

I also just read that.  Thanks again.

 

Is CH13 the best option to stop all of this now and work on a rebuild?  I think that I'd need to secure some financial support (coborrowers) for revolving credit that I might not be able to retain (my credit card utilization is low) and rebuild.

 

I'm also not sure how a family law judge would look at this pertaining to custody.  Does anyone have experience there?

Message 5 of 11
pizzadude
Credit Mentor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

I'm sorry to hear about your situation, and on top of it going through a seperation has got to be even more stressful.  

 

My comments are from the perspective of thinking about your situation long-term.   I understand that you need to deal with some high-interest rate debts now but it sounds to me that any addtional loans, in the short term, may not be wise given the uncertainty around your relationship.

 

If you haven't already, you should list out all marital debts and assets, along with who's name is on the house / cars / debts / bank accounts / investment accounts, etc.. and who's name is on all the titles / deeds.  Take this list with you to a consultation with a family law attorney - solely for you, not with your spouse.   The attorney should be able to provide some guidelines for the separation, and to help with specifics around no-fault / community property, etc.., should you end up deciding to divorce.   It may not be possible , but consider working now on how to divide assets / debts after seperation. 

 

If I were in your shoes I'd make sure you have a seperation document that details at a minimum who pays for what.   Understand that your credit will be negatively impacted if your spouse is obligated to pay for a joint account / loan and doesn't. 

 

Maybe you and your spouse have enough cash now to pay off some of the loans with extremely high interest, but for sure you should put some of it to use now to work with an attorney.  

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Message 6 of 11
805orbust
Valued Contributor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

Tough times require tough decisions. Sell the house. Sell the cars, pay off the debt, stabilize, save, then buy another home later on. It's a process. Don't fall into the trap of kicking the ball down the road...  my opinion of course.



Message 7 of 11
zerofire
Valued Contributor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

Oh what a world, what a world. I see lots of conflicting information that all screams one thing. There is too much credit mismanagement by overextending. Costs need to be cut fast. I can reasonably guess that whatever is securing the loans is most likely not worth the loan amount right now. Most people will buy their car outright with your finances. Also at low 600 you are not getting a third mortgage. Refinancing the primary mortgage is essentially getting a third mortgage as you will need to pay off both the first and second mortgage with the refinance and you cannot pull the strength of a good rate right now for that both in score and environment. As it stands you need to find a way to wipe out those "predatory loans" pronto without rolling them into new debt. Listing debiters will need to be done if you want more accurate guidance as we cannot take a guess.

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Message 8 of 11
JBJBJB1
Valued Member

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re

I think you should talk to a BK attorney about filing a chapter 13 repayment plan. I  wouldn't refinance your home.  That 95k will will  cost MUCH more in the long run, you already have a 2nd mortage and interest  rates have gone way up


@Anonymous wrote:

Hello Everyone -

 

I'm going through a separation with my spouse.

 

We are high income earners (almost $350k gross annual combined, I account for 67%).  However, also in a significant amount of installment debt due to both a medical issue and some other serious non-disclosed issues in the relationship.

 

Mortgage and car loans are all reasonable payments.  I can afford these on my own.  Including my home utilities & upkeep.  There are two mortgages on the home.  The second is a home equity loan which was used to consolidate even more installment debt.  While my credit soared for some time after this loan (2021), it's now going into the low 600s.

 

The plan has been to refinance the primary mortgage and take out yet additional equity in order to repay installment loans equating to approximately $95k.

 

More urgently, however, is what I would call loan shark "loans" from various online lenders that equate to just over $30k.  The interest rates vary from 35% - 300% from what I can see.  Some are in my name and some are not.

 

We have both recently receiving an influx of cash.  I am attempting to formulate a plan that uses the money wisely.

 

  1. Am I best to contact a credit consolidation company?   It's highly unlikely that I would quality for a consolidation loan but rather a negotiated settlement under one single payment that I can split with my spouse.
  2. The most urgent issue to address are the short-term "sharks" whose payments draw more than our net-monthly income.  Am I able to settle these and stop paying them, staying employed and working through a credit consolidation company?

Any other helpful advice would be greatly appreciated.  Thank you!



Message 9 of 11
SouthJamaica
Mega Contributor

Re: Spouse wants to separate, my debt repayment plan is now changing, significant short-term debt re


@Anonymous wrote:

Hello Everyone -

 

I'm going through a separation with my spouse.

 

We are high income earners (almost $350k gross annual combined, I account for 67%).  However, also in a significant amount of installment debt due to both a medical issue and some other serious non-disclosed issues in the relationship.

 

Mortgage and car loans are all reasonable payments.  I can afford these on my own.  Including my home utilities & upkeep.  There are two mortgages on the home.  The second is a home equity loan which was used to consolidate even more installment debt.  While my credit soared for some time after this loan (2021), it's now going into the low 600s.

 

The plan has been to refinance the primary mortgage and take out yet additional equity in order to repay installment loans equating to approximately $95k.

 

More urgently, however, is what I would call loan shark "loans" from various online lenders that equate to just over $30k.  The interest rates vary from 35% - 300% from what I can see.  Some are in my name and some are not.

 

We have both recently receiving an influx of cash.  I am attempting to formulate a plan that uses the money wisely.

 

  1. Am I best to contact a credit consolidation company?   It's highly unlikely that I would quality for a consolidation loan but rather a negotiated settlement under one single payment that I can split with my spouse.
  2. The most urgent issue to address are the short-term "sharks" whose payments draw more than our net-monthly income.  Am I able to settle these and stop paying them, staying employed and working through a credit consolidation company?

Any other helpful advice would be greatly appreciated.  Thank you!


You should pay off the shark loans.  If you try to settle with them they'll probably wreck your credit.


Total revolving limits 741200 (620700 reporting) FICO 8: EQ 701 TU 704 EX 685

Message 10 of 11
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